Traditionally litigation management involves the client, corporate counsel, calling the outside counsel or law firm and informing them they have a problem that needs to be resolved. If the problem is a suit that has been filed against the company, then a firm is retained and the defense begins. Often large corporations will have massive litigation budgets established in order to defend the company in the 100's of cases that are pending at any one given time. In massive tort litigation, a company could have 100's of cases pending in different states, counties and jurisdictions. This requires multiple firms and lawyers to be retained in order to handle the cases. As a result, corporate counsel is subjected to the different management styles, the jurisdictional nuances, and the different billing and invoicing practices for each law firm.
The invoicing and billing systems for each of the law firms that corporate counsel retains may vary which results in inefficiencies for both corporate counsel and for law firms. Typically, a lawsuit begins with commencement of an action by filing a complaint, then settlement negotiations may occur, and if they are not successful, then the case proceeds. The next step involves the parties commencing discovery on one another and on non-parties. Motion practice can begin before or after discovery depending upon posturing of the parties. After motion practice is completed, the case either settles or goes to trial.
The management of this process varies from law firm to law firm, often depending on the type of suit and the skill and experience of the attorneys working on the case. The cost of the suit accordingly varies because different attorneys have different management styles. Some attorneys may prefer to use experts, some may not, some may prefer extensive motion practice, some may not, some may rely heavily on depositions, and some firms may not take any depositions at all. These varying practices lead to inconsistencies of how corporate counsel deals with the various law firms it may retain. For example, if a corporation is defending itself against mass tort litigation cases that are pending in various states around the country, then law firms in each of those states would be retained. The attorneys in each of those firms will have different hourly rates, will have different experience levels, and will vary on how long they take to draft motions, prepare for hearings and depositions, etc. This causes unpredictability for budgeting purposes, something corporations would like to overcome.
Traditionally, the invoicing and billing for litigation is done either on a fixed fee arrangement, a contingency fee arrangement, or on a pay as you go, or hourly, arrangement where invoices are generated each month, and, hopefully paid. Each of these fee arrangements has drawbacks that could affect the relationship with counsel and the quality of the representation and the cost of the litigation.
Fixed fee arrangement requires the parties to establish a fixed fee amount at the outset of the case. With this type of arrangement, the work that is performed and the hours that are billed are recorded and tracked during litigation. Often, workload is adjusted based upon cost averaging. This type of fee arrangement runs the risk of being result oriented as the firm may be less inclined to be as effective if it sees the work is exceeding the time allotted in the fixed fee arrangement. Fixed fee arrangements can also result in other inefficiencies which affect the quality of the work and negatively affect the outcome of the case.
Contingency fee arrangements likewise have certain inefficiencies which may negatively affect the outcome of the case. For example, if the case continues and it is later realized that the outcome is going to bring little value, the quality of services rendered could decrease or cease all together. Other inefficiencies may occur with this arrangement resulting in a less than desirable outcome. On the other hand, if it is realized that the outcome of the case will yield abnormally high results, then the firm may realize an unfair return on their efforts to the client's dismay.
The standard pay as you go fee arrangement involves performing the work on a monthly basis and invoicing same shortly thereafter. In the traditional litigation invoicing and billing arrangement, a client would be advised as to the litigation process and, after the appropriate investigation, the case would begin. As the work is done, the time and cost are logged in on a daily basis. At the end of each month an invoice is created which summarizes the time and costs along with a description of services that were rendered. The invoice is then reviewed by the partner, corrected where necessary which requires steps back and forth with the typist, to where it is then finalized. Once finalized, the invoice generally goes through an auditing process in an accounting department of the law firm for verification with the firm's billing system.
If a firm's accounting department finds a problem, the invoice goes back to the billing attorney for correction and then goes through the system one more time. However, if the invoice passes scrutiny the first time, and is electronically sent, or is placed in an envelope, postage is applied to the envelope, and it is sealed and then forwarded to corporate counsel whose company receives it in a few days. Once the company receives the invoice, it goes to their accounting department to be logged in to the system. Thereafter, the invoice is forwarded to the corporate attorney that is in charge of that particular case, for review, critique, approval or disapproval. This requires corporate counsel to set aside the time for this step, which slows down the collection process. If the invoice does not comply with corporate counsel's billing standards, or otherwise is not acceptable, then the invoice could be rejected and possibly returned to the billing attorney for correction. Worse yet, the invoice could be put in the ‘to deal with later’ pile and it may sit for a lengthy period before being resolved. For the firm, this delay reduces cash flow, minimizes realization on the account and the entire process increases the cost of doing business for both in-house counsel and outside counsel.
However, once the invoice passes corporate counsel's review, the invoice is sent to the company's billing department for payment. In many instances payment is not even scheduled until thirty (30) days after the aforementioned process has been completed. Once the draft for paying the invoice has been cut, it too may set and then be put into an envelope, sealed, postage applied thereto, and sent off to the law firm. This requires yet additional steps by the law firm because it now has to reconcile the check with its own internal accounting system and then have the check deposited with the bank.
The aforementioned process can further be delayed if the charges billed on the invoice were not approved by corporate counsel. Worse yet, is when the work has been previously approved by corporate counsel, but the company now refuses to pay for the work after it has been completed. Thus, in the traditional litigation arrangement where the client pays as the work is done, significant steps are involved which can lead to inefficiencies, re-work disputes over billing, wasted time in the billing and invoicing process, loss of realization of time and money, and long periods before payment is ever made or received.
There are other problems with the traditional style of billing the client after the work has been. For example, controlling costs of litigation after the work has been performed, is inherently problematic. For law firms working on an hourly rate, there is little incentive in the system to be efficient. The result is that a firm may invoice for their inefficiencies and non-value added steps, which the client may not become aware of until after the work is completed and the invoice has already been sent to the client. It would be preferred to provide a litigation cost control management system that allows corporate counsel to control fees at their point of origin, that is, when the work is being performed. It would also be preferred to provide a methodology of managing the cost of litigation that controls the unit of time and the value of the activity, which would allow for automatic enforcement and compliance with the companies litigation guidelines, with little or no associated monitoring costs.
It would also be desirable to provide a litigation cost control management system that is much more than just a billing system, but instead an efficient cost control device that removes waste in the litigation process, surprises to the client, yet yields high quality legal services at predictable costs. The system allows the client to have complete control over the litigation process. The present invention accomplishes this objective through implementing cost containment and control, by accurately and continuously updating the case activity and the litigation budget through real time communications between inside counsel and outside counsel.
Another embodiment of the present invention provides a cost management system that allows for exceptions to be made during the case that can be immediately approved and added to the billing system with ease. Cost based decision making allows for continuous updates and allows corporate counsel to know at any given time, the cost, and status of the litigation without ever needing to pick up the phone and contact outside counsel. One aspect of the invention allows costs to be captured when the work is done, thus allowing the billing partner or other appropriate firm personnel to point and click in order to electronically invoice the client at any time. Thus, there is no need for the law firm or corporate counsel to review the invoice because the work has been previously approved.
Another embodiment of the present invention eliminates the need for corporate counsel to approve items on invoices, eliminates any up-time charges, eliminates any re-work, eliminates over billing and payments for any of the inefficiencies as a result of the firm. This is accomplished by utilizing litigation process maps that allow for task value pricing at the outset of the case in order to establish a budget.
One of the embodiments of the present invention provides a point and click invoicing system that automatically sends a current invoice to general counsel's accounting department. It would be desirable to immediately transfer the required funds from the corporation to the firm's bank account, thus eliminating several days of delays and effort. The present invention accomplishes this task because the work performed has been previously approved at the amount agreed upon, and thus, the standard inefficiencies in the system are removed.
Another embodiment of the present invention provides a cost based decision making litigation process management system that allows for capturing immediate application of the best practices of all law firms that are within the system. Yet another embodiment of the present invention allows inside counsel to be able to award bonuses to a firm that does exceptional work by allowing corporate counsel to add a variance to the predetermined budget.
Another embodiment of the present invention provides a system with changeable variances, for each task performed by the firm in order to assist in budgeting at the outset of the case. The system also accommodates projected expenses, and allows corporate counsel to approve a budget, or reject it with alternatives, and then to have the outside law firm approve the budget. One aspect of the present invention would provide for exceptions to the budget, with prior approval and would automatically update the system so that real-time data can be obtained as to the current costs of each case.
Another embodiment of the present invention provides statistical analysis of the performance of each law firm that is in the company's database.